Mark Thompson rose and spoke from the heart to his audience at the QE2 Conference Centre in London. 'Public service broadcasting is not an arid theology,' the director-general of the BBC said last week. 'It's a passion - a passion I believe you can see in Planet Earth and hear in Alan Johnston's voice.'

Yet even as Thompson spoke the rug was being yanked from beneath his feet. His lieutenants were preparing to show journalists a clip from the forthcoming documentary A Year with the Queen in which the monarch could be seen storming out of a photo shoot 'in a huff', as BBC1 controller Peter Fincham put it, after being asked to remove her crown by celebrity photographer Annie Leibovitz. Only after the story had hit front pages and run on BBC News 24, provoking anger from Buckingham Palace, did Fincham apologise and admit that the Queen had done no such thing. The sequence had been edited in the wrong order.

The debacle came just days after Ofcom hit the corporation with the first fine in its 80-year history for deceiving viewers of Blue Peter over a phone-in competition, a scandal which has engulfed other channels and undermined the ethics of television itself. As Robbie Gibb, deputy editor of Newsnight, admitted in an email to viewers: 'It has of course been a very difficult and embarrassing week for all of us at the BBC.'

So embarrassing that there have been calls for Fincham to quit. Lord St John of Fawsley, a friend of the royal family and an executive at rival Sky, said: 'Peter Fincham should resign. A mistake like this is so colossal it goes right around the world and damages the Queen. Where have they been all these years? When you do a story about the Queen, you check, check and check again.'

John Whittingdale, the chairman of the all-party Culture, Media and Sport Committee, pronounced: 'Undoubtedly this has been a very serious blow to the honesty, integrity and the reputation of the BBC. One of its greatest assets is its reputation for truth and honesty and that has been damaged.'

At the heart of the matter is trust. The publicly funded broadcaster is held to a higher standard than any commercial rival or newspaper. Now it faces its biggest crisis of confidence since a slip of the tongue by Andrew Gilligan on the Today programme led to a bitter battle with the government and brought down the BBC's director-general and chairman. Questions about its output are now being asked more urgently than ever. What are the dark secrets of the cutting room? Can audiences believe what they see?

Thompson, fearing that more skeletons might tumble out of the cupboard, is this weekend undertaking a purge of 'fast practice' by programme makers, offering an amnesty by which producers who offer information about past mistakes are unlikely to face a reprimand. At 3pm on Friday he sent a memo to staff insisting: 'Nothing matters more for us than honesty, accuracy and fair dealing with the audience. We must now put our house in order. We cannot allow even a small number of lapses, whether intentional or as a result of sloppiness, to undermine our reputation and the confidence of the public.'

This followed an email from BBC executives, in the wake of the phone-in disaster, urging staff to identify programmes 'where you feel there may be a risk that in some way audiences could have been misled'.

Under particular scrutiny is the fly-on-the-wall genre, which combines the voyeuristic thrill of reality television with the credibility of structured documentary. A Year with the Queen, unfinished but still due to go out in the autumn, is a prime example of the genre, peering into a year in the life of the monarch as if through the eyes of a discreet flunky. The BBC and the production company involved, RDF Media, claim that the deceptive preview clip resulted from a blunder in editing at RDF which gave the impression the Queen was storming out when in fact she was storming in.

For some the dangers inherent in such film-making, and the capriciousness of the editing suite, have become too much to stomach. Alison Cahn's distinguished career included researching the controversial Bafta-winning documentary Death on the Rock and producing and directing Michael Cockerell's News from Number 10, on the workings of Alastair Campbell's press office. Most recently she filmed Michael Portillo living as a single parent for a week on BBC2. But then she walked away.

'There were more and more pressures to do stuff that I was uncomfortable with,' Cahn said. 'I think what happened with the Queen was really interesting because the cutting room is a very dangerous and tempting place as it's very easy just to see people as material. When you get back in the cutting room, what you've shot is material, but you always have to remember it's something real - real people and real events - and not treat it as though you're cutting a drama. I felt that television had got to that stage and was becoming more so.'

Cahn, 50, now director of communications at University College London Hospital, added that subtlety was being sacrificed: 'What you've got to get is the extreme, and therefore I felt sometimes you were showing a very skewed version of the world, and I thought something a bit more real and subtle was often more interesting than the extreme.

'I thought it was unwise both for the interest of television, but even more honesty. I once got told by an executive producer at the BBC that I wasn't "ruthless enough". I'm not saying the Portillo programme was like that, but there were times I would feel I was being asked to do things I wasn't comfortable with. I wouldn't do them.'

A Year with the Queen is a case in point. The BBC and RDF Media have said that the key footage featuring the Queen was put together months ago and never intended to be seen by press or public in the wrong sequence. Neither organisation has been able to explain why this was done or who it was intended to impress. Typically Fincham would have viewed the clip two weeks in advance when working with the BBC publicity office on compiling the series of autumn season previews.

RDF is led by creative director Stephen Lambert, a former editor of BBC2's documentary strand Modern Times who was responsible for inventing the 'life swap' genre with shows such as Faking It and Wife Swap. Although RDF has attracted its share of controversy, it also made The Queen's Castle, an insight into the workings of Windsor Castle which is understood to have pleased the Queen and helped persuade her to allow the same team to follow her for a year.

A source close to the RDF production team said: 'They are extremely good at what they do but this was a complete and utter cock-up. None of us saw the show reel before it happened. It was a case of, "What the hell?" It's mind-boggling but it's a bona fide cock-up rather than conspiracy. People are scratching their heads and asking, "How the bloody hell did this happen?"'

The corporation's growing reliance on independent production companies is now under the microscope. Producers are keen to catch the eye of the BBC and win commissions. They show editors the best clips they can find and give a hard sell. In this case, the pitch might have been given too much 'topspin'.

A senior editor in the BBC's factual division, who did not wish to be named, gave an insight into the vetting process. 'Sometimes when people cut trails together they are out to say this is the kind of stuff in the programme and A doesn't necessarily always follow B,' he said. 'In this case a trailer may have been passed to the BBC for impact. They can stuff things together to get you saying, "Bloody hell, what's going on?" Then they tell you. But for it to get as far as Peter Fincham is unprecedented.'

The editor added: 'At the BBC the people who make trails don't just do factual, they do all sorts of programmes. Their ambition is to drive as many people to the programme as possible. I'm always asked to approve trails and I've often knocked them back because the last thing you want is to have people saying you promised one thing and this is something else. I've never heard of anyone at the BBC talk about a deception as great as this. People here are shocked and horrified.'

Tales abound in the industry of 'indies', as they are known, employing staff on short-term contracts, cutting corners on training and working them all hours in the race against deadlines. Producers complain of being under pressure to come up with the most dramatic way of putting across their message to win the increasingly competitive ratings war. One told Radio 5 Live last week: 'It is so difficult to get decent programmes made that the temptation to just flam things up a bit is very, very high.'

Michael Grade, the chief executive of ITV and former BBC chairman, echoed the concerns raised by Alison Cahn when he warned: 'We are in an age today where there has been a huge influx of young talent into the industry as it expands. They have not been trained properly; they don't understand that you do not lie to audiences at any time, in any show - whether it's news or whether it's a quiz show.'

The BBC faces a difficult task to mend fences with both the royal family and the public. On Wednesday, Thompson will be summoned to the council chamber at Broadcasting House to 'provide a full account' of the episode to the corporation's governing body. The governing body is called the BBC Trust. Viewers may yet decide whether to regard that as a tautology or an oxymoron.

The truths behind reality TV

The Connection, Carlton, 1996 Documentary about heroin smuggling, following the Colombia-to-London drugs route. A Guardian investigation proved it had been faked, and Carlton was fined £2m.

Guns on the Street, C4, 1996 Documentary portraying the trade in illegal firearms in Manchester. In 1999 Gary Bispham, who was jailed after the programme, revealed some of it was faked.

Driving School, BBC1, 1997 This made a star of 55-year-old cleaner and learner driver Maureen Rees. The director later revealed that scenes of Maureen crashing were reconstructed.

The Vanessa Show, BBC, 1999 Vanessa Feltz's talk show was axed when the Mirror revealed an agency provided actors to portray guests.

Wife Swap, C4, 2003- In 2003 a show about a racist white couple paired with a black couple went unaired. The couples said the makers, RDF, dropped the episode because the families got along.Katy Heslop